Traditionally, to be afforded the opportunity to accept credit and debit cards from their customers any organisation (typically called a “merchant” by the financial services industry) must be granted so-called “proper” status as a bank. This proper status is given to a merchant through the vehicle of a unique Merchant ID (or MID) from the bank and allows them to participate in the payments chain. Pretty much all large businesses have a merchant account like this. However, the smaller the organisation gets the less likely that they will have one and may be missing out on the benefits.
The banks which provide a merchant account are not quite the same as the ones with which we are most familiar as personal current account holders. All major high street banks have what is known as an “acquiring” bank arm or division. For example, in the UK NatWest has ‘Streamline’, Lloyds-TSB has ‘Cardnet’, Barclays has ‘Barclays Merchant Services’, HSBC has ‘HSBC Merchant Services’ and so on. In addition, some organisations outside the high streets banks (like American Express and PayPal for instance) have a license and do their own acquiring. Subject to a range of pre-conditions, all these “acquiring banks” are able to issue a Merchant ID and allow an organisation of any sort to start taking credit and debit cards. They will authorise or decline each customer transaction, collect any payments on the merchant’s behalf and pay the money into a merchant’s nominated bank account.